Government’s plan to outsource productions at CIL are delayed as the company resist Planning Commission’s proposal.
The Government’s plan to outsource production at Coal India Limited (CIL) mines to the private developers is likely to delay, as the PSU resists the proposal of Planning Commission. The proposal says that CIL needs to offer ready-to-operate mines to developers and operators (MDOs) under the 25-year agreement.
According to the sources, the PSU has opposed certain clauses of the proposal, claiming it to be in the favor of the contractor. However, the Government is waiting to award the first set of MDO contracts before 31 Mar, 2014. In addition, 7 Coal blocks have been short-listed already for the purpose.
The Plan panel in its last meeting on 15 Nov, 2013 agreed to make changes in the model concession agreement designed earlier on miner’s request. They made the changes owing to the opposition by CIL. The PSU wants to involve the private parties so that the land acquisition process becomes faster. The clauses to be excluded from the design and the other changes are not yet addressed in CIL’s full wish list. CIL has demanded for force-majeure and contract termination in order to protect its commercial interest. It also want the contractors to share the legal and financial burden of securing regulatory clearances and land acquisitions. As these two are the major hurdles in Coal production.
“The next meeting on the concession agreement is scheduled for 29 Nov, 2013. However, considering the complications involved, we anticipate subsequent discussions. Also, unless it is a win-win for Coal India and the contract miner, the plan may be spiked by the boards of CIL and its mining subsidiaries. Under these circumstances, there is little possibility of awarding such contracts this fiscal”, said an official.
According to the sources, the Planning Commission has decided to take back its proposal of dividing the costs into fixed and variable components of 50-75 per cent and 25-50 per cent respectively. It has decided to keep only one charge considering the clauses for mining rates.
The contractor will thus have to quote a single price for extracting Coal. This decision is relevant with current outsourcing arrangement of CIL in which the contractors are paid on the basis of quantity. The miner has also outsourced around half of its total production (452 MnT) to such contractors till date.